Exploration October 2014

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WHEN OIL AND WATER DO MIX Top 10 Countries by proved natural gas reserves (and their production rates) mexico’s oil reform: why the lifeblood of the country is being moved to private entities

OCTOBER 2014

EDITOR’S COMMENT

“Change is the law of life. And those who look only to the past or present are certain to miss the future.” – John F. Kennedy The winds of change are blowing stronger than they have in a long time. With armed conflicts in Iraq, Syria, Ukraine, Gaza, Nigeria and to an extent, even south of the border in Mexico, many former bystanders are calling for change of some sort.

But the gun is not the only thing that necessitates change. As more eyes turn to the climate, and as energy supplies long unquestioned proved susceptible to interruption, many are calling for a world-wide dialogue on the future of energy and its role in the geopolitical sphere.

In our exclusive interview with California-based Chevron, we take a look a look at how the company is helping farmers in their drought-stricken home state.

Natural gas has become a major contender for the fuel staple of the future, so we at Exploration World would like to remind the readers which countries have the most of it and how much they’re already producing in this month’s top 10.

Then, we focus on China, one of the nations with the fastest growing demand for natural gas, to see what the country is doing to satisfy its own energy needs. Next is a feature on the changes coming to the Mexican oil and gas industry, and the stumbling blocks to achieving the country’s end goal. Finally, we take a closer look at how the newest sanctions targeting Russia will and won’t affect western oil and gas companies doing business in the country.

As always, thank you for reading this issue of Exploration World. Please enjoy.

Ian Hanner Editor ian.hanner@wdmgroup.com 3

CO CN OTNETN ETNST S FEATURES

28 Pipelines

This month we focus on the customer experience with the latest technology

14 Exploration 6 Drilling

When Oil and Water Do Mix

What China is Doing to Meet its Own Natural Gas Demand

Mexico’s Oil Reform: Why the Lifeblood of the Country is Being Moved to Private Entities 20 Logistics

How Will New U.S. and EU Sanctions Affect Russian Oil Deals?

36 Top 10

Top 10 Countries by NAMCOR Proved Natural Gas Reserves

COMPANY PROFILES

52

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CANADA

AUSTRALIA

44 Big Guns Energy

74 TAG Oil

52 TORQ Energy

86 Webster Drilling & Exploration Ltd

USA

92 Mosman Oil & gas limited

60 Rockpile Energy Services

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October 2014

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How Companies Keep Aging Pipelines Running Smoothly

74 TAG Oil

60 Rockpile Energy Services 92

Mosman Oil & Gas Limited

5

DRILLING

WHEN OIL AND WATER

DO MIX What Chevron is doing to keep water flowing to drought-stricken farmers W R I T T E N B Y: I A N H A N N E R

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October 2014

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DRILLING RESIDENTS OF CALIFORNIA, and students nationwide, know fullwell the importance of the San Joaquin Valley in the food production of not just the U.S., but the world over.

It’s been estimated that at the height of its agricultural production the San Joaquin Valley could feed every person in the world. Unfortunately, in the past several years, California has faced an increasingly dry climate, with precipitation levels only about 20 percent what they would normally be statewide. This puts every county in California between the drought categories “abnormally dry” to “exceptional drought”—the highest level which more than 50 percent of the state is in.

However, just northeast of Bakersfield, there is a seemingly unlikely ally in the agricultural world.

Chevron, the California-based oil and gas company (ranked 12 on Fortune’s Global 500 list for 2014), operates a series of oil wells at the Kern River Field, which is the fifth largest oil field in the country, producing 70,000 barrels of crude oil per day.

Oil however is far from the most abundant resource that is produced at the field. According to Chevron’s 8

October 2014

lead land representative for the region, Abby Auffant, the field produces about nine barrels of water for every barrel of oil, or approximately 760,000 barrels of water per day. Chevron uses a portion of this water in a process referred to as steam flooding.

“The oil that we produce from the Kern River Field is very heavy and very viscous; think molasses,” Auffant said. “It’s a very heavy consistency.

So in order to produce that oil from the ground, we need to reduce that viscosity and the steam flooding operations increasing the temperature of the oil makes it easier to produce from the ground.”

The rest of the water, some more than half, goes through a water treatment process that separates it from the oil. According to Auffant, the water treatment necessary is minimal.

“The water that’s produced is at near fresh water quality standards. So it goes through minimal filtration at our facility in the Kern River Field before it is transported over in an approximately 8 and one-half mile pipeline to the Cawelo Water District.”

The water is tested in numerous locations along the supply line by a third party inspection agency that

W H E N O I L A N D W AT E R D O M I X

Kern River Field

ensures cleanliness and alignment with various quality standards.

The Cawelo Water District (CWD) supplies water to about 90 highyield farms over 45,000 acres of farmland. As reported by The New York Times in July, in normal years when California was not facing such extreme drought conditions, water from the Kern River Field facility would make up about 25 percent of the CWD’s total supply. However, in the current climate, that number is closer to 50 percent as other sources

of water abroad “dry up.”

“These are the years that it really shines, because that water is constant no matter what the hydrology is,” said David Ansolabehere, the CWD’s general manager told The New York Times. “In wet years, it almost becomes a problem because we don’t have so much use for it. But in dry years, boy, it really does come in handy.”

The CWD would normally purchase water from external sources for $30 to $60 per acre-foot, but today in 9

DRILLING

California, as pointed out by The New York Times, the price can be as high $1,300 per acre-foot, making the cost for Chevron’s water a steal by comparison.

“Essentially, Cawelo is reimbursing Chevron for the costs to get the water from our facility at Kern River Field to their facility and that works out to approximately $30 per acre feet,” Auffant said. “Water Districts and oil 10

October 2014

companies speak in different terms.

We speak in barrels of water per day. They speak in acre-feet,” or the amount of water necessary to fill an acre one foot high.

Though it makes a massive difference, Chevron’s supply comes far from being able to solely sustain farmers in the area. Since the water produced at the Kern River Field has a higher salinity, it must be diluted with

freshwater from other sources before it is suitable for irrigation purposes.

With the drought as potentially disastrous for farmers’ business as it is, Chevron’s water program objectively, from a mathematical standpoint, seems to be hugely beneficial to the community. But when speaking about not only the food, but livelihood for millions of people, the matter becomes one of passion.

“I’ve always felt that we could feed the world if they’d allow us enough water,” said Roy Pierucci, a pistachio farmer in Kern County, in a Chevron video about the program. “Every drop of water that we can get from any source is vitally needed and to have it available all the time is just great.”

The severe drought continues to press on numerous industries. A study released in May by the University of 11

DRILLING

San Joaquin Valley

California, Davis predicted a cost to the San Joaquin Valley’s agricultural industry of roughly $1.7 billion and a loss of over 14,500 jobs if dry conditions persist.

Chevron states that it remains openly committed to doing all it can for the continued well-being of its community 12

October 2014

in Kern County and the economy that relies on it.

“We’re very in-tune with the drought conditions within the state,” Auffant said. “In our operations, over 81 percent of our total water output is used for beneficial purposes within the state.

Between our program with Cawelo and

W H E N O I L A N D W AT E R D O M I X

our program within one of our other fields, as well as the reuse of our water for enhanced oil recovery instead of pulling on other water resources to be able to produce the valuable resource of oil, [we are committed].�

In addition to the water that Chevron supplies to the CWD, Carla Musser,

the company’s policy, government and public affairs manager, added that Chevron regularly leases grazing rights for sheep and cattle on companyowned land.

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E X P L O R AT I O N

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October 2014

WHAT CHINA IS DOING TO MEET ITS OWN NATURAL GAS DEMAND With growing demand driving higher imports, how will China support is natural gas needs?

W R I T T E N B Y: I A N H A N N E R

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E X P L O R AT I O N

CHINA’S SINOPEC IS spending about $10 billion on a coal-to-gas plant that stands to decrease in some part the nation’s reliance on coal.

According to Reuters, the development will utilize coal-to-gas technology that has yet to be significantly tested. If it works, it could serve as an example that a China that relies on a more diverse energy 16

October 2014

WH

makeup is possible. The project, which is being developed in the Xinjiang region, is one of Sinopec’s responses to rising natural gas consumption and the impact coal is having on the environment in China.

For years, major Chinese cities have been criticized for perpetual smog that in part has been linked to the country’s high reliance on coal. While China has

H AT C H I N A I S D O I N G T O M E E T I T S O W N N AT U R A L G A S D E M A N D

undergone a major era of development over the last few decades, coal came to play a larger and larger part in the nation’s energy makeup, accounting for about 69 percent of the total power supply in 2011. On the other hand, natural gas, which gives off a fraction of the carbon emissions, has held a relatively small role in China’s energy makeup, accounting for just 4 percent in the same year.

However, projections have coal playing a smaller role in the future while natural gas consumption is forecasted to go up. According to the U.S. Energy Information Administration (EIA), coal’s role is expected to fall to about 63 percent by 2020 and 55 percent by 2040. At the same time, the EIA reports China intends to increase natural gas’ role to 8 percent by the end of 2015. Between 2012 and 2013, the EIA estimated China’s overall natural gas consumption increased by roughly 10.15 percent.

With the increase in natural gas consumption, the country faces huge price tags on the ramped up importation of the fuel.

In July, French oil and gas company Total S.A. announced they had entered a deal with China

National Offshore Oil Corporation (CNOOC) to import roughly 1 million tons of liquefied natural gas (LNG) per year to China over the course of a 15 year contract.

Total S.A. already supplies about 8 percent of the LNG used by China annually. Now as China’s consumption of natural gas speeds up, Total and China both are looking to take advantage of a business relationship that has already proved itself to be stable. According to Motley Fool, the deal is so attractively lucrative that on the news, Warren Buffet purchased 8.8 million shares in Total to take advantage of the contract.

At the same time, Russian gas company Gazprom has been developing a massive $70 billion pipeline to bring gas into China by as early as 2019. The pipeline, named Power of Siberia, has exceeded cost projections on numerous occasions, having originally been expected to carry a development price tag of at most $55 billion. China has agreed to pay for a $25 billion portion of the development cost.

The pipeline is being designed to carry 39 billion cubic meters of natural gas per year to China and is expected 17

E X P L O R AT I O N

to generate roughly $400 billion in revenue for Russia over the course of the 30-year contract. At 39 billion cubic meters per year, or roughly 1.377 trillion cubic feet, the pipeline should deliver almost 25 percent of China’s total annual natural gas consumption (as of 2013).

While these projects mean a lot for the overall energy makeup of China, 18

October 2014

they come at massive economic expense. If China doesn’t act soon and in a substantial way to reduce the reliance of natural gas imports, they face a precarious energy situation.

Sinopec’s investment in the coalto-gas plant, assuming success, will play a small role in the overall energy supply, but it will serve as a reminder that China doesn’t have to rely so

heavily on foreign energy companies moving forward.

The country has already begun trying to tap into its own ample reserves of natural gas.

In July, Sinopec announced they were on path to develop China’s first large scale shale gas project, boasting proprietary technology that allowed the company to access

previously unreachable deposits.

Sitting atop what the EIA estimates is over 1.115 quadrillion cubic feet of shale gas, China is the most shale gas rich country on the planet. All that remains now is a substantial increase in the way the country produces the resource.

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LOGISTICS

HOW WILL NEW U.S. AND EU SANCTIONS AFFECT RUSSIAN OIL DEALS? As the pressure is turned up on Russia, what sort of blowback can western companies expect?

W R I T T E N B Y: I A N H A N N E R

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October 2014

21

LOGISTICS

IN COOPERATION BETWEEN the U.S. and European Union (EU), a new round of sanctions is to be implemented targeting Russia over its continued aggression in Ukraine.

Unlike past sanctions, which have left large energy companies relatively unscathed, this newest round of sanctions has the potential to halt billions of dollars in development.

According to Bloomberg, multiple 22

October 2014

HOW WIL

key U.S. officials revealed on condition of anonymity that the new policy would prohibit American and European cooperation in any oil and gas exploration activities in the Arctic, offshore locations or in shale formations. “These measures will increase Russia’s political isolation as well as the economic costs to Russia, especially in areas of importance to President [Vladimir] Putin and

LL NEW U.S. AND EU SANCTIONS AFFECT RUSSIAN OIL DEALS?

EU

23

LOGISTICS

Igor Sechin those close to him,” Obama said in a statement, according to Reuters.

Though unconfirmed, it’s suspected one of the individuals close to Putin that Obama was alluding to is Igor Sechin, the head of Russian oil company Rosneft. Rosneft has multiple business ventures with both ExxonMobil and BP, leading to speculation that these newest sanctions may end up inadvertently hurting western companies.

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October 2014

“Sanctions have a boomerang effect and without any doubt they will push US-Russian relations into a dead end, and cause very serious damage,” Putin said about the previous round of sanctions during a visit to Brazil last month.

What sort of projects does Rosneft share with supermajors?

Well, to name one, ExxonMobil is in the midst of a joint venture with Rosneft on the Pacific island Sakhalin

that produces an estimated 100,000 barrels of oil per day. The cost to ExxonMobil hovers somewhere around $10 billion in investment, according to Reuters.

Then there’s BP, which actually owns a 19.75 percent share of Rosneft stocks. In addition to multiple jointventure operations, Rosneft owes BP a significant amount of oil in repayment of a series of loans.

Now while these long-established or

ongoing operations are not supposed to be threatened, it illustrates the strong ties between Russian petroleum companies and the West.

So what will the impact be?

“If true that new sanctions were to ban technology and services for Arctic, deep-sea and shale exploration, that would be a very big deal,” Jason Bordoff, former energy adviser Obama and founding director of the Center on Global Energy Policy, 25

LOGISTICS

said in an e-mail to Bloomberg. “It would significantly curtail Russia’s future oil production capacity, although it is important to note that it would require close collaboration between Europe and the United States to be effective.”

To give an example, previous 26

October 2014

sanctions had left open a loophole that allowed Seadrill Ltd. to bring a floating rig into Russian waters in July on behalf of ExxonMobil and Rosneft, angering western officials who said the operation undermined the intent of the sanctions already imposed. Later that month, Seadrill signed additional

contracts with Rosneft.

According to Bloomberg, one of the larger projects that could be affected by these new measures is the $700 million well the ExxonMobil and Rosneft spudded in the Kara Sea in August.

ExxonMobil and BP aren’t the only supermajors that stand to have operations or new deal affected. Royal Dutch Shell and Total S.A. both have numerous projects with the country.

Total, a French company, relies on Russian oil for nearly 10 percent of its total production.

Speaking to the Washington Post about how sanctions have affected Shell’s operations, CEO Ben van Beurden said, “We’ve gone through clarifications with host governments, government here in Washington as well, to understand what actually was meant. By and large, it comes out unaffected. We are drilling a few unconventional [shale] wells [in Siberia] as part of that joint venture. We cannot export [certain] technology [to Russia] anymore. We are working with governments to say how far can we go, what can we finish and what new activities can we start or not start. To sum up, the sanctions

have not had a lot of impact on our operations in Russia.”

Norwegian company Statoil also has ongoing developments in the nation.

“This is something we’re monitoring closely,” Statoil CFO Torgrim Reitan said, according to Bloomberg. “Our positions in Russia have a very long time horizon.”

It isn’t necessarily these energy companies’ fault that existing and developing contracts put them in this precarious situation. During the years following the collapse of the Soviet Union, an environment persisted within the industry that encouraged exploration and production in Russia not just for profit margins, but in the hope that greater incorporation of economic conditions between the West and Russia would help prevent a situation just like the one the countries find themselves in today.

While the details of the sanctions are still being interpreted by the various parties affected the Russian foreign ministry said that in siding with the U.S., the EU had “made its choice against” the ongoing peace process in Ukraine (referring to a current cease fire), according to Reuters.

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PIPELINES

MEXICO’ S O WHY THE LIFEBLOOD OF

MOVED TO PRI

Why is Mexico doing away with a 76-yea 28

October 2014

W R I T T E N B Y: S T E P

OIL REFORM: F THE COUNTRY IS BEING

IVATE ENTITIES

ar-old law and how did they get to that point?

PHANIE C. OCANO

29

PIPELINES

Nieto Petróleos Mexicanos, or Pemex, has enjoyed a monopoly over Mexican oil since 1938. Regarded as the country’s biggest export, crude oil generates roughly a third of Mexico’s tax revenue and is one of the country’s largest economic contributors.

Oil production within the country has seen a significant decline within the past decade, however, leading to the most recent passage of a series of rules governing the 30

October 2014

country’s oil industry.

On Aug. 11, Mexican President Enrique Pena Nieto signed into law legislation that will open its oil and natural gas markets to foreign direct investment. The laws are expected to have major implications for the future of Mexico’s oil production profile.

“Although there are many complexities to the new reform and many details that still must be settled before the reforms can take

MEXICO’S OIL REFORM

effect, reform is expected to improve the long-term outlook for growth in Mexico’s petroleum and other liquids production,” the U.S. Energy Information Administration (EIA) announced.

The opening up to private entities could increase Mexico’s oil and natural gas production by about 75 percent, according to EIA predictions, with

3.7 million barrels of oil expected to be produced per day in 2040.

Before the reform, the EIA said oil production within the country would fall to 1.8 million barrels a day in 2025, “struggling” to stay between 2 and 2.1 million barrels in 2040.

Introducing profit- and productionsharing contracts for foreign

31

PIPELINES

Federales companies, as well as licenses that allow companies to be paid with the oil and gas that is extracted in mining projects, the new contracts provide for “a particularly attractive incentive for investment in Mexico’s energy sector,” the EIA said.

Jorge Pinon, oil expert from the University of Texas, Austin, agrees, saying “the economic and business interest from 32

October 2014

international oil companies” is present in Mexico’s market.

“On top of that, there is a need for Mexico to increase production. There is a need for Pemex to grow as a truly independent oil company,” Pinon told The New York Times.

Illegal Siphoning Impacts Production Pemex has seen oil production hit a

significant standstill in the last decade for a variety of reasons, including aging wells and a lack of renewed interest, which has primarily been attributed to high tax rates.

Perhaps most significant to this decline, however, are the cartel activities that have led to the siphoning of 10,000 barrels every day from Pemex’s pipelines. In fact, since the year 2000, Pemex has seen a

1,548 percent increase in illegal siphoning, fueling a multi-million dollar underground industry.

With an estimated payout of about $4,600 for every 10,000 liters of crude oil, it comes as no surprise that there has been a massive influx of cartel members engaging in the “milking� of pipelines, or tapping into sealed valves to siphon the resource.

It is relatively easy money, too, 33

PIPELINES

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October 2014

MEXICO’S OIL REFORM

as a drilling can take as little as 20 minutes, according to a cartel member interviewed by Vice News under conditions of anonymity.

The group attributed to the majority of siphoning activities is none other than Los Zetas – a powerful and violent criminal syndicate in Mexico considered by the U.S. government as the most technologicallyadvanced, sophisticated and dangerous cartel in Mexico.

Los Zetas has in recent years approached countless petroleum workers offering payment for information that could help them tap into a pipeline or threatening them with violence if they refuse to comply.

Upon attainment of the oil, most of it is sold domestically or goes back down south, but an unknown portion has been shown to travel across the border to the U.S. It is likely that the oil siphoning already being perpetrated by cartels will continue if not escalate as foreign and domestic capital speeds up production.

“As long as they keep transporting gas through the pipes, it will continue,” said the anonymous cartel member.

The Future of the Mexican Oil Industry Mexico’s constitutional change means Pemex will receive much-needed help in increasing its oil production. For foreign oil giants such as Chevron, Royal Dutch Shell and ExxonMobil, it means gaining access to untapped oil reserves that Pemex says could total 113 billion barrels, including 26.6 billion in the waters of the Gulf of Mexico, according to The Washington Post.

The reserves are estimated at a value of $11 trillion.

Pemex chief Emilio Lozoya says Mexico also boasts 460 trillion cubic feet of unexploited shale gas in rock formations beneath its soil, estimated at a worth of $2.2 trillion.

The country is expected to begin opening up sites to private entities by the first quarter of 2015.

“The energy reform opens a great opportunity for Mexico, and we need to seize it with complete and fast implementation,” Peña Nieto said. “I’ve told different areas of the government to accelerate all of the measures necessary to put this reform into action for the good of Mexico.”

35

TOP 10

TOP10

coun natu their

Who con

ntries by proved ural gas reserves (and r production rates)

ntrols the fuel of the future? Written by: Ian Hanner

37

TOP 10

If an increasing public relations campaign on behalf of several of the Supermajors is to be believed, natural gas is the energy source of the near future.

With oil consumption in many developed nations declining (albeit at a snail’s pace) and mounting pressure from environmental activists and public regulators alike, crude oil is increasingly being set aside in future predictions of the world’s energy makeup.

Joining oil on the sidelines: coal.

Though coal has seen explosive rates of growth in relation to the explosion in Chinese development, the heavy polluter is increasingly being deemed too dirty and relatively inefficient to stake the future of energy production on.

Enter (or reintroducing) natural gas, one of the oldest energy sources used by the human race.

With a fraction of the carbon dioxide release during burning as oil and an even lower proportion still to coal, gas may very well be the fossil fuel staple that picks up the slack for an energy thirsty populace in years to come.

38 October 2014

It’s already making its re-entry in a strong way. In addition to a vast number of industrial and power generation projects relying on the resource, Anheuser-Busch recently announced it would be joining UPS in switching a large number of trucks in its fleet from diesel to compressed natural gas.

So, with natural gas playing such a large role in near-future energy predictions, it’s an important thing for not just E&P executives, but anyone wellinformed in geopolitics, to remind themselves which countries have the most natural gas (and how well they’re tapping into it).

These are the 10 countries that have the highest proved reserves of natural gas as of the end of 2013, according to U.S. Energy Information Administration (EIA) data. As a caveat, I’ve included the production rate information for that same year below each subhead.

10

Algeria 159.05 trillion cubic feet in proved reserves

T O P 1 0 C O U N T R I E S B Y P R O V E D N AT U R A L G A S R E S E R V E S

Onshore Algeria was number one on Ernst & Young’s (EY) recent list of the top 10 hotspots for African oil and gas exploration.

While the country has grappled with its fair share of political and military strife over recent years, EY opines that the country has been stabilized to a significant extent by economic development (brought on primarily by the petroleum industry, according to the business intelligence company).

The EIA has not published data on the 2013 production levels for Algeria, but the nation produced about 3.053 trillion cubic feet of natural gas in 2012.

09

Nigeria 182 trillion cubic feet in proved reserves

Also highly regarded on EY’s list is the African nation of Nigeria, which has the highest overall proved reserve of natural gas of any country in the continent.

There is limited data on the overall number of operation affected in Nigeria by the campaign of

terror by Islamic militant group Boko Haram, which took the international spotlight earlier this year when they kidnapped dozens of school girls from an academy that they viewed as forbidden by the Quran. The nation produced about 3.053 trillion cubic feet of natural gas in 2012.

08

Venezuela 195.1 trillion cubic feet in proved reserves

Venezuela has struggled significantly since the death of long-time president Hugo Chavez. During the course of his presidency, Chavez tried to implement a series of sweeping 39

TOP 10 socialist reforms with the goal of benefiting the people of Venezuela, including the nationalization of the oil and gas sector. While the overall consensus on the success of his policies differ greatly from analyst to analyst, few argue that since his death, the country has been in an economic tailspin, with rumors spreading that the nationalist model may soon be repealed to save the ailing nation. Venezuela produced about 1.003 trillion cubic feet of natural gas in 2013.

Exporting Countries (OPEC) and the Gas Exporting Countries Forum (GECF), the United Arab Emirates (UAE) is becoming a major financial powerhouse in the Middle East with Dubai becoming almost synonymous with wealth, especially as it pertains to oil and gas. According to the EIA, domestic natural gas use is skyrocketing and will likely heavily affect the amount of natural gas that the nation is able to export in years to come. The UAE currently imports and exports liquefied natural gas (LNG) and shares gas pipelines with its neighbors Qatar and Oman. The country produced about 1.854 trillion cubic feet of natural gas in 2012.

06 07

United Arab Emirates 215.025 trillion cubic feet in proved reserves A member of both the Organization of Petroleum 40 October 2014

Turkmenistan 265 trillion cubic feet in proved reserves

A country that seems almost conspicuously absent from geopolitical discussion considering its vast natural gas reserves, Turkmenistan comes in at about 265 trillion cubic feet of proved natural

T O P 1 0 C O U N T R I E S B Y P R O V E D N AT U R A L G A S R E S E R V E S

gas reserves, something the EIA calls a “significant increase from 94 [trillion cubic feet] estimated in 2009.” Turkmenistan consumed about 1 quadrillion British thermal units of energy in 2008, with approximately 78 percent being supplied by natural gas, according to the EIA. The country produced about 2.492 trillion cubic feet of natural gas in 2012.

05

Saudi Arabia 287.844 trillion cubic feet in proved reserves

Saudi Arabia is a country that has been synonymous with oil for decades, but despite its rather large proved reserves, it has fallen relatively short in natural gas.

This is apparently an opinion shared by even the CEO of the state-run oil and gas producer Saudi Aramco, Khalid Al-Falih.

Speaking at the Offshore Northern Seas Conference and Exhibition in Norway last week, Al-Falih revealed the company has plans on investing nearly $40 billion in development of natural gas infrastructure and production, as well as a few other projects in oil, with the end goal of doubling the country’s natural gas output over the next ten or so years.

In 2013, Saudi Arabia produced about 3.637 trillion cubic feet of natural gas and was one of only three of the highest reserve countries to also be in the list of top 10 producers.

04

Unites States 308.436 trillion cubic feet in proved reserves

The U.S. has experience an exponential increase in not only proved reserves, but overall production, as the shale revolution has fully utilized 41

TOP 10

hydraulic fracturing to tap into formations previously thought inaccessible. While a domestic ban on the export of crude oil remains in place, natural gas has been available for international export for years with relatively few restrictions. This is particularly important not just because of what it means for the economy, but also for what it means to Europe.

As tensions continue to rise (and sanctions pile up) over the Ukrainian-Russian crisis, European leaders are growing increasingly concerned by the prospect that Russia may turn off the supply of natural gas to Europe—of which it is the largest supplier. The U.S. produced about 24.282 trillion cubic feet of natural gas in 2013, making it the largest producer of natural gas in the world 42

October 2014

despite being fourth in proved reserves.Anschutz Ranch. Since then Anschutz has continued investing and directing various oil endeavors while branching out into telecommunications as Chairman of the Board of Qwest.

Most notably, his Anschutz Entertainment Group has brought Anschutz a series of investments in the sports industry by buying and constructing numerous highprofile venues, such as the Staples Center in L.A.

03 Qatar 890 trillion cubic feet in proved reserves Very nearly all of Qatar’s massive reserves of natural gas are in the North Field, part of a formation that the country shares with Iran.

In addition to being the third

T O P 1 0 C O U N T R I E S B Y P R O V E D N AT U R A L G A S R E S E R V E S

largest natural gas producer in the world, Qatar is also the second largest in the Middle East. It also has the distinction of being the world’s largest exporter of LNG since its low energy demand allows it to export nearly all of its natural gas. Qatar produced about 5.523 trillion cubic feet of natural gas in 2012.

02

Iran 1,187 trillion cubic feet in proved

reserves In addition to the fourth largest proved reserves of oil in the world, Iran has the distinction of holding the second largest reserves of natural gas, which accounts for about 17 percent of the world’s total proved reserves, according to the EIA. The country’s natural gas sector has taken a substantial hit in recent years (though not quite as significant as crude oil) as international sanctions crippled the country’s energy sector. The nation produced about 5.649 trillion cubic

01

Russia 1,688 trillion cubic feet in proved reserves Topping off the list of largest proved natural gas reserves is Russia, a country that has had a lot of scrutiny on its oil and gas sectors as the international community mounts wave after wave of increased sanctions on them. Gazprom, the state-run natural gas behemoth, is currently developing a massive natural gas pipeline for about $70 billion that will generate an estimated $400 billion+ in revenue for the nation over the course of 30 years. This project, and others like it, may prove increasingly important in geopolitics in the coming years with mounting Chinese gas demand providing a potential alternative to exporting in Europe.

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Big Guns Energy Service

Big Guns Energy Services is Integration of GeoContainme the Canadian Oil Sands

With an emphasis on science and implementation, BGES i a new generation of natural resources development.

Written by: Ian Hanner

Produced by: James Gilligan

es (BGES)

s Leading ent Evaluation in

is an energy services company for

45

BIG GUNS ENERGY SERVICES (BGES)

H

eadquartered in Calgary, Alberta, Big Guns Energy Services (BGES) believes in applying science to prevent environmental and financial disasters while improving safety conditions.

The company, formerly known as Big Guns Perforating & Logging, was established in 1996 by Bill Darling and Duncan McPhedran, with McPhedran now serving as President and Chief Financial Officer. Their primary zone of operation is in the Canadian oil sands and unconventional resource plays where the company offers 46

October 2014

“full service business integrating professional consulting and field services, with a special focus on caprock GeoContainment projects.�

BGES had gone through major changes since 5 years ago when there was a drastic change in the business environment. With the low natural gas price and a trend of horizontal wells replacing vertical wells, there are less wells being drilled, therefore less services to be done by a conventional wireline company. In 2009 when the financial crisis hit, the business climate has turned more difficult.

Tight credit, accompanied by

E X P L O R AT I O N W O R L D

continuous downwards pressure on pricing together with a constant climb in labour cost, it was a highly competitive market. In order for the business to stay on top, BGES have taken the niche market approach and continuously evolve to cope with the “new norm.”

Speaking to Dickson Lee, the Chief Executive Officer and Chief Technical Officer for Big Guns Energy Services (BGES), you get the impression that this is a company that places tremendous emphasis on their employees. To Lee, putting employees first is the most solid, strategic policy the company could

implement and one that leads to far greater success.

“We basically look at people as the greatest asset to our company,” Lee said. “When there are no people, the company does not exist. We’re only here because of our people and when you look at a consulting, engineering and service business, expertise basically comes from people. That’s why we see people as our biggest asset in the company.”

He went on, “In our business, equipment will depreciate over time. Therefore, we put our people first because this is the only asset that will appreciate in value if you w w w. b g e s . c a

47

BIG GUNS ENERGY SERVICES (BGES) spend the time to invest, develop and retain them. An outstanding team can adapt to a dynamic business environment in today’s ever-changing world. With highly adaptable people, the company can quickly and intelligently respond to changing market conditions as proven in the past few years.”

Gaining experience and becoming a valuable part of the company is something Lee can personally relate with. He joined the company in 2004 to bring focus on the technical

side of log quality control, log interpretation and casing vent flow analysis. Lee gained a seat on the board of directors in 2007 and was appointed CTO in 2010, a position he held while he established a Geoscience & Engineering division with an emphasis on streamlining and integrating caprock GeoContainment testing. Lee became CEO in 2013.

“My main goal is to unleash the full potential of our GeoContainment business, which represents 80 percent of our annual revenue

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E X P L O R AT I O N W O R L D

today,” he said. “With the number of caprock failures in the oil sands and collapses in salt caverns in recent years, subsurface reservoir GeoContainment became critical for public safety and environmental responsibility.”

He added, “The science for GeoContainment exists, but is often challenging to apply and implement.

The challenge not only comes from the science or theories, but from applying the science in a real-life application such as the harsh oilfield environment with many uncontrolled variables. We have an in-house team of technical experts and specialized operations personnel that work synergistically to bridge this implementation gap.”

Lee is serious about wanting to grow the GeoContainment business. The company recently invested about $1 million to build a geomechanics lab after identifying a lack of such facilities in the area of operations. Lee noted that BGES had heard of companies sending cores across the border for testing because of the lack of facilities in place in Canada.

“We saw a gap in the marketplace:

there are civil engineering geomechanics labs, but not too many are specialized in testing for the petroleum industry. There are some fundamental differences between the two different focuses: Testing soils from 10 meters below ground might have a different process than 200 meters. [For example], working with and preserving cores from deep below ground is also much more challenging [and] the petroleum service industry works 24/7. Urgent means yesterday, not next week.”

Very few service companies today have a focused target market to maximize their growth potential.

Most find their businesses lack a competitive edge because they are too diversified - Spreading their resources too thin on too many business lines or markets seems to be a common problem. BGES has taken the target market approach seriously. Lee added, “We don’t try to appeal to the mass, we only focus on a distinct group of clients, people with similar values and a problem that we can help them solve.”

According to Lee, BGES isn’t ready to stop growing. The company w w w. b g e s . c a

49

BIG GUNS ENERGY SERVICES (BGES)

plans to double the lab’s capacity over the next year and grow their fleet size by over 50 percent in the next two years while doubling the size of their technical team in the next three years.

BGES is focusing on several areas to achieve these growth plans. The company periodically performs talent gap analyses to identify key areas where new employees and the expertise they bring to BGES would benefit the organization’s long-term 50

October 2014

growth. This new talent will prove especially crucial as the company tries to merge its reputation for operation excellence with qualityoriented professional service known for technical capabilities and expertise.

BGES also intends to increase the capacity and expand the capabilities of the geomechanics lab.

“Coming up on the horizon, we are anticipating an increase in oil sand projects delineation and potentially

E X P L O R AT I O N W O R L D

more stringent regulatory requirements, thus creating a high demand for core testing,” Lee said.

“We also see a high demand in cavern storage, salt cavern waste disposal and governmentinitiated carbon capture and sequestration (for greenhouse gas reduction). These are different applications, but all require a diligent caprock integrity, or GeoContainment, study. Therefore, we will be investing in expanding our lab’s capability to capture these target markets.”

He added, “Besides the geomechanics lab, we are also investing much time and resources in expanding out geomechanics modeling capacity due to a high market demand.”

BGES intends to streamline field operations through development of multi-purpose testing equipment and teams to improve costeffectiveness on site. Having less equipment on site also significantly reduces the company’s environmental impact.

That idea leads right into one of the last ways the company plans to achieve its strategic growth plans: through greater implementation of its Continuous Improvement Program.

“We are constantly looking for opportunities to improve and streamline our operations based on feedback from operators, supervisors, and field managers,” Lee said. “We will be investing resources into making this program official and expand it to encompass all other business areas.”

Company Information INDUSTRY

Oil and Gas Field Services HEADQUARTERS

Alberta FOUNDED

1996 EMPLOYEES

~100 REVENUE

~$15 million

w w w. b g e s . c a

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Torq Energy Logistics

Torq Energy Logisitcs Poised Canadian Crude-by-Rail Mar What sets Torq Energy Logistics apart in the crude-by-rail Written by: Ian Hanner

Produced by: Michael Magno

d to Corner arket market?

53

TORQ ENERGY LOGISTICS

O

perating six transloading terminals in key energy regions in Alberta and Saskatchewan, Torq Energy Logistics is excellently positioned for growth in a favorable market.

Canada has experienced a nearly 29 percent increase in the production of crude oil between 2008 and 2013. This massive increase in product has allowed for substantial growth in the crudeby-rail (CBR) industry, with Torq Energy Logistics leading the way in transportation solutions. Established in 2011, Torq Transloading is a division of Torq Energy Logistics 54

October 2014

(Torq) that provides “fully-integrated crude handling and transportation service from the well site to the rail car.”

While Canadian demand for CBR services skyrockets, Torq is adopting a policy of rapid expansion to corner the market as quickly and safely as possible. To help facilitate those plans for expansion, Kohlberg Kravis Roberts & Co. (KKR) invested C$250 million in Torq with the goal to focus “on accretive acquisitions and new opportunities to further integrate the upstream and downstream aspects of the energy supply chain with the addition of complementary energy products

ENERGY

and services, including stranded propane, butane and ethane as well as y-grade and natural gas liquids, in addition to its crude focus to date,” Torq’s website says.

Torq’s President and CEO Jarrett Zielinski said in a press release, “We are honored and excited to be partnering with KKR. The shared vision between us in conjunction

with the reputational and capital backing of KKR is expected to provide a long runway for growth.

Today is an extremely active and exciting time to be in the energy logistics space. New technologies continue to unlock oil and gas reserves previously deemed uneconomic. The unexpected increase in energy production w w w . t o r q e n e r g y. c o m

55

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is reshaping the landscape of how we move energy from wellhead to market. Torq has been compelled to rethink conventional means and innovate new modes of energy transportation and storage infrastructure so as to provide premium economics for its customers and facilitate continued exploration and production.�

As an industry leader, Torq tries to set an example for high safety standards as well.

Employing portable, closed loop systems and bottom car loading process, the company cuts costs and improves operational efficiency all while minimizing environmental impact and protecting employees.

To add to these safety standards, all 400 plus employees are required to go through a safety program called H2S Alive in which workers are

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SKEY EYE

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TORQ ENERGY LOGISTICS

ENERGY

educated on the dangers of hydrogen sulfide gas, how to prevent exposure and proper response in the event of an accident.

Torq’s niche lies in the transport of heavy crude oil such as that produced in the Canadian oil sands. Light crude is relatively easy to ship by pipeline and there have been a good deal of developments to fill that demand. Heavy crude however must be diluted with condensate so that it is light enough to flow through pipelines. Once it reaches its destination, the condensate must be removed at considerable cost. Shipping crude by rail however removes the necessity for condensate.

“Not only are we able to maintain the integrity of the raw product, we can also remove the condensate from the supply chain completely,” Zielinski said, according to Energy & Mining International.

He also said to Oilweek, “My view is that light crude should move by pipeline and heavy crude should move by rail.”

Since its start in 2011, Torq has expanded from a small trucking firm with only 25 employees and a transport capacity of about 600 barrels of crude per day, to a major energy logistics company that is capable of moving over 45,000 barrels of crude per day; a rate that is expected to more the double in 2014. Now with the investment from KKR, there’s no telling what’s next for this visionary company.

Company Information INDUSTRY

Oil & Gas Transport HEADQUARTERS

Alberta Canada FOUNDED

2011 EMPLOYEES

400+

w w w . t o r q e n e r g y. c o m

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RockPile Energy Service

RockPile Energy is Changing Dakota Fracking Industry

From people to technology, RockPile continues to set itself ield of energy completion services.

Written by: Ian Hanner

Produced by: Alex Hortaridis

es

g the North

lf in the f

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ROCKPILE ENERGY SERVICES

62

October 2014

E X P L O R AT I O N

W

ith a unique take on the value of employees and proprietary technology, RockPile Energy Services is not your traditional energy completion services provider.

Established in June 2011 by the Triangle Petroleum Corporation, RockPile was created to fill what Triangle saw as a serious lack of frack service providers in North Dakota. The relatively low number of companies offering this service meant that oil companies operating in the area were waiting for eight to twelve months to get well fracked, according to Curt Dacar.

Dacar is the chief executive officer and previous chief operating officer. He had a key role in the founding of the company. Brought in by Triangle for his decades of industry experience working at Schlumberger, Dacar was instrumental in getting the company off the ground.

“I was working in North Dakota and I knew some of the folks in their organization through past relationships and work history with some of the folks that actually worked for me when I worked at Schlumberger,” Dacar said.

“They contacted me and asked w w w . r o c k p i l e e n e r g y. c o m

63

global knowledge. In

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SUPPLIER PROFILE

ECONOMY POLYMERS AND CHEMICALS

Founded in 1951, Economy Polymers and Chemicals has grown to become one of the largest manufacturers of high viscosity guar gum powder in the world, as well as an industry leader in providing oilfield stimulation chemicals. chemical manufacturing facilityHeadquartered in Houston, Texas, we are a multinational company with operations in the United States, Canada, Dubai, Russia and Argentina. All of our custom chemical blending and manufacturing facilities are ISO 9001:2008 certified and utilize advanced technology to ensure that our chemical products are produced, packaged and delivered on time and to the highest standards of quality.

At Economy Polymers and Chemicals we are committed to extensive research and development in order to continuously create new and better products for the industries we serve. Over the years we have made major investments in R&D – and have also made a substantial manufacturing investment in India to develop and produce new varieties of guar.

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E X P L O R AT I O N

if I would help them try to get a frack crew set up, so through the Summer I kind of consulted with them, helped them decide on the equipment and so forth. And in September of 2011, they actually asked me if I’d join the company as the COO, which I decided to do.

[From there] I just started ordering equipment, building infrastructure, looking for land, putting building plans together and looking for an executive team.”

why we focus on hiring regional people, knowing that people from California, Texas or anywhere in the South-- it’s just not an environment that’s easy for them to adapt to. You see a lot of turnover.”

Attrition isn’t something that a company of RockPile’s size can easily abide. In inclement weather like that, Dacar said that it’s not at all uncommon to see a 30 to 40 percent turnover rate. By hiring (relative) locals, Dacar boasts that Building a Workplace the company has an attrition rate of Community only 15 percent during the winter.

In the years since, the company has Whether or not that’s due to the purchased several fracking fleets origin of the employee is up to and established a strong core of interpretation because RockPile employees from the region. Due to certainly has other ways they try to the harsh winters, hiring as locally make employees feel they have a is something Dacar said is vitally career rather than a job. In addition important to the company. to paying for a financial advisor to “The reason we do that is-- I grew come in for all new employees, the up in North Dakota and I’ve worked company goes out of the way to in North Dakota for many years,” make it easy for employees to live Dacar said. “I know what it’s like and work in North Dakota. to work there at 20, 30 below zero “We realized that North Dakota with a 20 mile per hour wind. It’s was, and still is, a very challenging brutal. The winters, or rather six place to find good places to live,” or seven months of the year, are he said. “We said that we wanted extremely difficult to work in. That’s to be able to provide these people w w w . r o c k p i l e e n e r g y. c o m

67

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ROCKPILE ENERGY SERVICES with an opportunity to come to North Dakota and get housing at a reasonable cost, so we actually built a 30 unit multi-building complex of higher scale apartments with hardwood floors, tile, etcetera. We rent those out to our employees at about 30 to 40 percent off of what the current market price is.”

That dedication to the living standards of their employees didn’t come with a low price tag. RockPile

E X P L O R AT I O N

paid about $6 million for that development.

“We wanted to be able to attract people to come to the community and bring their families and be part of the community because we fully realized that if we provide them housing and a place to bring their families, it’s much easier to keep that employee as a long-term, careerfocused employee, rather than someone rotating in and out of the

w w w . r o c k p i l e e n e r g y. c o m

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ROCKPILE ENERGY SERVICES business every two to three weeks.

To be honest with you, the housing has been very successful. It’s allowed a lot of people to come to North Dakota that normally wouldn’t.

It’s allowed us to keep them, develop them and promote them within the company.”

Moreover, RockPile goes out of its way to make employees feel like they’re part of a family within the company with awards banquets, camping, hiking and jeeping trips, and even a resort stay at Lake Tahoe. Dacar said he believes this sort of employee cohesion not only leads to happier, long-term workers,

E X P L O R AT I O N

but a higher standard of quality brought to every job.

Driving Technology The emphasis RockPile puts on the quality and satisfaction of their employees isn’t the only thing that sets them apart. With innovative technology systems, the company is unique in its handling of both chemicals and propant for use in fracking operations.

According to Dacar, chemicals used in the fracking process are typically delivered and transported in 330 gallon totes. Every time the tote is opened or transported,

w w w . r o c k p i l e e n e r g y. c o m

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ROCKPILE ENERGY SERVICES there is a small risk of spilling. Since this is not healthy for employees nor the environment, RockPile developed what they call a Chemical Management System that minimizes the number of times the chemicals need to be moved, minimizes the potential for a spill and protects employees, all while adding greater efficiency to the whole process. “Not only has it been a successful rollout from a logistical standpoint-- we save a ton on logistics-but just from the environmental side of things, having less exposure. And of course tank bottoms on those old totes make it very difficult to get every drop out.�

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E X P L O R AT I O N

The company also has a unique system for delivering proppant for holding open induced fractures. While the industry standard for the handling of proppant hasn’t changed much in over 50 years, RockPile wasn’t satisfied with the quality of service traditional methods allowed them.

“We looked at it and said there were two things that we need to do differently,” Dacar said.

“One: we don’t like the way the industry handles chemicals. Two: we don’t like the way the industry handles proppant. So what we wanted to do really was revolutionize the things that we could impact and change.”

He added, “With the traditional way you handle proppant from the mine to the wellhead, that grain of proppant, let’s say silica sand, would be transported four or five times. When we came up with this gravity feed system, we really wanted to just be able to take it from the mine to the wellhead. We got it from our transload facility in Dickinson to the wellhead now, which cuts down on several of those transfers. We’re still working on getting the technology to the point where we can take it right from the mine to the wellhead.

So it’s impacted our business from a logistics side considerably, from both a working capital standpoint as well as an efficiency standpoint.”

Company Information INDUSTRY

Fracking Services HEADQUARTERS

Denver, CO FOUNDED

2011 EMPLOYEES

~60 (on prospect) REVENUE

$200 million (last year)

w w w . r o c k p i l e e n e r g y. c o m

73

TAG Oil:

TAG Oil: Canadian O New Zealand Run

Merging the best of Northern and South Written by: Ian Hanner Produced by: Wayne Masciotro

Owned,

hern Hemisphere exploration 75

TA G O I L

Aerial view of 2013’s Ngapaeruru exploration.

BY BLENDING PRODUCTION styles from Canada and New Zealand, TAG Oil has managed to find a sweet spot for operations in the Southern Hemisphere.

TAG Oil was founded in Canada in 2002 by Alex Guidi with the express purpose of exploration in New Zealand. While trading on the Toronto Stock Exchange, the company invests nearly 100 percent of their capital in the development of projects in their host country.

Though a relatively small company in the world of oil production, Chief Operating Officer Drew Cadenhead says the company has no problem 76

October 2014

competing in their niche market.

“We are the most active explorer in New Zealand and have had good exploration success over the last few years,” Cadenhead said. “A very strong financial position [has us] positioned well for future growth into the next few years.”

Cadenhead’s optimism is not without merit. TAG Oil has seen tremendous growth in the last decade. TAG Oil was “relatively inactive” for the first seven years of its existence, according to Cadenhead, who used to be the Chief Executive Officer.

“We were just JV partners with

E X P L O R AT I O N W O R L D

Hydrocarbon storage tank at TAG Oil’s Sidewinder Field

some other companies, so once we took control of things ourselves and we were getting much more active operationally, I switched from CEO to COO,” he said. “I relocated myself and my family back to New Zealand to run all of our operations here. Our CFO at the time, Garth Johnson, took over the role of CEO up in Vancouver.”

Cadenhead’s expertise comes from several decades of experience working for various exploration companies in both Canada and New Zealand. He also holds a Bachelors of Science Degree in Geology from the University of Calgary. Now tasked with the direction of TAG Oil’s operations in New Zealand, he’s putting his skills to work.

“It is something that’s very important to us: our perception as a good corporate citizen; as a very safety and healthoriented company. Our record is impeccable here and it’s very important for us to maintain that record.” w w w. t a g o i l . c o m / d e f a u l t . a s p

77

SUPPLIER PROFILE

COMPANY NAME

Employees: Xxxxx Established: Xxxx Industry: Xxxxxxxxxxxx xxxx xxxx xxx xxxxx xxxxx.

Services: Xxxxxxxxxxxx xxxx xxxx xxx xxxxx xxxxx.

Ongoing Projects: Xxxxxxxxxxxx xxxx xxxx xxx xxxxx xxxxx Management: Xxxxxxxxxxxx xxxx xxxx xxx xxxxx xxxxx Website: address goes here as the last entry

E X P L O R AT I O N W O R L D

“Our niche here in New Zealand is to run our company as a small nimble junior company-- sort of like a Canadian model, not surprisingly,” he said. “What we found was that there were a number of Majors down here, [such as] Shell and some of the big Australian companies, mainly focusing offshore. No one was really focusing on-shore where there’s some really nice oil. In particular, shallow oil plays, so really kind of up our alley as far as what we were familiar with as Canadians working in Calgary.”

One of TAG Oil’s strongest plays is in the Taranaki Basin. The only sedimentary basins in New Zealand to have been commercialized to date, the company has invested heavily in the region with three plants and a wholly-owned network of pipelines just east of the field.

From there, everything ties into their mother facility, the Cheal plant.

The drilling operations in that region produce between 2,300 and 2,500 barrels of oil equivalent per day, securing a steady cash flow.

According to Cadenhead, TAG Oil will be producing in that region for years to come having only drilled

roughly 25 percent of the company’s total acreage.

“If we were to stop drilling here today, the oil would keep flowing for about another 10 to 15 years,” he said. “They’re nice long reserve life, index fields. They produce very well.”

Speaking about new drilling operations in the region, he added, “These wells will cost us about $3 million to drill and complete and tie in and we’ll get a net present value out of these wells of somewhere between $10 to 30 million. It’s really a great little play for us.”

The success of smaller scale, but very stable operations in shallow plays like these, has afforded the company the ability to develop higher risk operations. With reportedly zero debt and about $50 million in reserve, TAG Oil is looking to explore deeper targets in the region. According to Cadenhead, there are numerous reservoirs situated at depths of between 4,000 and 5,000 meters. With larger pool sizes, he estimates the value of each of these wells would be closer to $20 million.

With stable cash flow from the w w w. c o m p a n y u r l . c o m

81

TA G O I L

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E X P L O R AT I O N W O R L D

Taranaki Basin, the company has been able to turn its attention to other regions yet to be developed, such as the East Coast Basin. “[The East Coast Basin] clearly has a working hydrocarbon system,” Cadenhead said. “We know that because there’s 300 or 400 oil and gas seeps where oil and gas is actually gurgling out of the ground. So we know the kitchen is working there and we recognized that about five years ago and secured a very large land base-nearly 2 million acres.”

He estimated it would take about three years to gather enough data and drill enough exploratory wells to prove commercial viability, but according to Cadenhead, several independent engineering assessments have indicated that the company is sitting atop reserves in the billions of barrels.

“It just remains to be seen if it can be cracked,” he said. “We’re the only ones trying to crack it. It’s one of the main reasons the shareholders in TAG are keeping their fingers crossed and hoping for a hit over there, as well as the good work that

we’re doing in the Taranaki Basin.”

The small staff size at TAG makes the company’s successes thus far even more impressive. With only 25 employees in New Plymouth, TAG’s revenue for the 2014 fiscal year was just over $2.3 million per person. Over the last five years that the company has been growing, the staff has been hired on one-byone, with only two people leaving the company in that time span, according to Cadenhead.

“We have a lot of fun here,” he said. “It’s a really loose atmosphere and because it’s such a small group, we don’t get bogged down in red tape and paper work. We just yell at each other down the hallway instead of sending memos around. We chat around the coffee pot. It really is a small family type of [operation] here.”

As a foreign entity operating in another country, TAG Oil has to be extra careful about their perception as good for the community. With a very active role sponsoring both local academic and sporting organizations, the company tries to make it clear that they’re trying to give back to their host country.

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TA G O I L

The process isn’t easy though.

Cadenhead pointed out that in recent year, the oil and gas industry has come under scrutiny from the public in a way that it hasn’t before.

“It’s probably one of the biggest challenges for us, to tell you the truth, and one of the biggest risks is getting permission and consent to drill wells,” he said. “It’s something we put a lot of effort into and I can honestly say many, many more times the effort than we [put into it] just four or five years ago. It 84

October 2014

just wasn’t a consideration. It has become a consideration. And that’s not just here in New Zealand; that’s a global phenomenon.”

He added, “It is something that’s very important to us: our perception as a good corporate citizen; as a very safety and health-oriented company.

Our record is impeccable here and it’s very important for us to maintain that record.”

The natural gas produced by the company doesn’t just benefit New Zealand by introducing jobs and

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taxable revenue. Since TAG Oil doesn’t own a facility to liquefy natural gas, all of the natural gas produced in the country is sold in New Zealand without the added costs accrued by shipping overseas.

Meanwhile, the company’s crude oil is shipped to primarily Asian markets such as China, Japan and India, which require oils with very low sulfur content, and sold at a premium. From there the company imports cheaper oil back from the Middle East to refine into gasoline and diesel for use in New Zealand.

“We’ve got the choice of either consuming that oil here or shipping it offshore,” Cadenhead said.

“There’s an insatiable thirst for oil in the Southeast Asia part of the world. It’s a great place to find oil.

It’s a great place to find high quality oil in particular.

As I said, we’re netting back on our oil sales here probably close to $80 a barrel right now.”

Cadenhead said he could see the company taking a number of paths in the decade to come.

Most exciting would be proving commercial viability on their unconventional plays in the East Coast Basin.

“If the unconventional play starts to work for us and we can have success with the proof of concept of being able to flow hydrocarbons from those multi-billion barrel reservoirs that we see over on the East Coast Basin, that’s a completely different ball game,” he said. “Most likely, TAG, at the size that we are, would get bought out by a Major at that point.”

Company Information INDUSTRY

Oil and Gas HEADQUARTERS

Vancouver, Canada FOUNDED

2002 EMPLOYEES

25 REVENUE

$57,546,899 (2014) PRODUCTS/ SERVICES

TAG Oil is a Canadianowned exploration and production company for both oil and gas that operates exclusively in New Zealand. By merging the styles of both countries, the company has been able to solve problems no one else has, becoming the busiest explorer in New Zealand.

With a small staff size, the company is able to stay highly-adaptive to an evolving energy market and act fast to capitalize on growth opportunities.

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Webster Drilling &Explo

Webster Drilling & Exploration

Drilling Services for New Zeala

With a diverse range of services and above ave Webster leads the pack in New Zealand Written by: Laura Close Produced by: James Hayes

oration Ltd:

n: Professional

and and Abroad

erage training,

W E B S T E R D R I L L I N G & E X P L O R AT I O N LT D .

WEBSTER DRILLING AND Exploration Ltd. is based in Wellington, New Zealand and has over 29 years experience in the drilling industry, safely carrying out operations in over 14 countries on five continents.

Full Article: Webster Drilling and Exploration Ltd. was founded in 1983 as a company able to handle jobs across the spectrum of drilling operations.

The company has carried out contracts covering a large number of services including oil and gas exploration, geotechnical, coal and mineral, environmental, landfill gas extraction, drainage 88

October 2014

drilling rock anchor installation and water well drilling.

With such a diverse range of offerings, Webster Drilling and Exploration (Webster) has been able to solidify a strong market hold in native New Zealand, along with a presence in Antarctica, Oman, Pakistan, Papua New Guinea, Canadian Arctic, Indonesia, Seychelles, Iran, Brunei, India, Turkey, Mozambique, Cameroon, Caribbean, Australia and the Pacific Islands.

Headed by Bain Webster, Jeff Ashby and Peter Rutland, the company boasts a senior management staff with a combined

E X P L O R AT I O N W O R L D

total of more than 110 years industry experience.

with the goal of increasing safety and efficiency. The company also maintains a wide range of more Service Offerings traditional drilling rigs, including In 2011, Webster purchased a highly truck and tractor mounted, trailor advanced VR-500 super single cyber mounted, skid mounted, helicopter drilling rig dubbed Nova-1. In 2012, and people portable rigs, workover Nova-1 began drilling wells in the and oil and gas well drilling rigs, Taranaki basin under contract with according to their website.

TAG Oil. One of the company’s most “Nova-1 makes use of the latest successful service offerings is technology to create efficiencies in anchoring services, especially in well drilling, and is quick to move and Wellington, New Zealand. rig up,” Webster’s website reads.

“Since 1997, Webster Drilling & The company has also employed Exploration Limited has completed BOP Lifter systems, Mechanized 495 rock anchor projects in pipe handling systems, Volant Wellington,” their website reads. casing running tools and more, all “These projects varied in size w w w. w e b s t e r d r i l l i n g . c o m /

89

W E B S T E R D R I L L I N G & E X P L O R AT I O N LT D . up from one to 265 anchors.

Earthquake strengthening has been an increasing priority in Wellington in recent years and Webster Drilling specializes in tight access drilling equipment to get inside buildings for the installation of vertical seismic uplift anchors, with a recent project totaling 2,450 meters of vertical anchor installation inside an existing building. The company has also completed some very large anchor projects (400 plus) in other parts of the country. Webster Drilling is Wellington’s most experienced rock

anchor installer.”

Able to anchor structures in rock or soil, Webster has become the go to provider for that service in Wellington.

Continuous Improvement Through a good portion of its history, Webster has “managed HSE and operational risks by amalgamation into large multinational client HSE programmes.”

“During the late 1990’s we recognized that in order to achieve a step-change improvement in safety and operational performance, we Drill your way to

a better bottom line

Certified ISO9001 & API Spec 7K, 16C & Q1

Design and manufacture of Drill Pipe, Heavy Weitht Drill Pipe, Drill Collars and Drill Stem Accessories.

Professional Manufacturer of Rotary Drilling / Vibration Hose (API 7K) and Flexible Choke Kill Lines (API 16C), BOP Hose (API 16D).

Longkou Waterfront Resort Industry Zone 265705, Shandong, China Tel: +86 535 8639820 / +86 535 8575066 Fax: +86 535 8639720 Email: gdz1996@hotmail.com / sale@sdlthose.com

www.sdlthose.com

Phone: +65 6260 1522 | Email: sales@dpmaster.sg www.dpmaster.com.sg

E X P L O R AT I O N W O R L D

would have to formalize the long term experience and work practices within a structured framework represented by a management system,” the website reads. “The development of an effective management system was to ensure appropriate risk management efforts would be consistently applied by people at the worksite to manage major and other workplace hazards to ensure safe and reliable operations.”

Webster’s whole staff management team have completed courses including: First Aid, Site Safe Passport, Helicopter Underwater Escape Training, Gas detection, Permit to Work, Schlumberger Injury Prevention, Schlumberger DriveSmart, Hazard Identification, Blow Out Prevention and Well Cap, IWCF, DICAT Drillers Training, Confined Spaces, Breathing Apparatus, Dangerous Good Training, Emergency Response Training, Explosives Handling, Helicopter familiarization, Helicopter Loadmaster training, Defensive Driving, Chevron Fatigue Management, Firefighting, Working at Heights, Antarctic survival training, Forklift License, Wheels, Tracks and Rollers training, Fall Arrestor, Heavy Trade License, Truck & Trailer License, BOSIET, and NEBOSH International General Certification.

With such a diversified range of service offerings and an exceedingly well-trained management staff, clients of Webster Drilling and Exploration Ltd. can know they, and their developments, are in good hands with the company.

Company Information INDUSTRY

Exploration World HEADQUARTERS

New Zealand FOUNDED

1983 PRODUCTS/ SERVICES

Webster Drilling and Exploration Ltd. is based in Wellington, New Zealand and has over 29 years experience in the drilling industry, safely carrying out operations in over 14 countries on five continents.

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Mosman Oil & Gas:

Mosman Oil & Gas on Track Discoveries is Australasia

Mosman Oil & Gas lends fresh eyes to neglected resourc Written by: Ian Hanner Produced by: Wayne Masciotro

k for Major

ce areas

93

MOSMAN OIL & GAS

Cross Roads-1 Wellsite

ESTABLISHED IN 2011, Mosman Oil & Gas has risen quickly to become a major contender in the exploration industry of Australia and New Zealand.

The company was founded

by John Barr and John Young, two seasoned businessmen in the mineral industry. Mosman’s strategic objective is the acquisition of overlooked areas of resource potential and realizing value through the “development, joint venture or sale of the assets.” Mosman was listed on the London Stock 94

October 2014

Exchange on March 20, 2014.

In 2013, the company’s board of directors added Andrew Carroll, an engineer with more than 30 years of industry experience, to the company as the technical director and a member of the board. According to Carroll, he was brought into the company while it was focusing on resources in Papua New Guinea.

“I became involved because I had success in Papua New Guinea with Ampolex with the Kotuku project and managing integral upstream

E X P L O R AT I O N W O R L D

Drillforce Rig #1 - rigging up

while we applied for permits and discovered a major petroleum system which is now being developed as second LNG project in PNG,” Carroll said.

After reviewing the opportunities available in Papua New Guinea (PNG), the company began diverting focus on two major projects in New Zealand and Australia, the Petroleum Creek and Officer Basin projects respectively.

“It’s a great opportunity,” Carroll said. “The company is totally oil focused and totally focused in New

Zealand and Australia at this stage.”

Oil was discovered in the Petroleum Creek Project area in 1896 when railway workers were installing a new rail line near the coal developments at Greymouth.

Small wells were drilled in 1902 and 1910, with production appearing to have mostly dried up shortly after. According to Carroll, production completely ceased in 1986 and no work had taken place in the area since.

“We came across the project around two years ago,” he said.

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MOSMAN OIL & GAS “The permit was held by a passive investment company that couldn’t organize the funding required to keep up with the work program. We were able to acquire the permit and move ahead. We’ve now drilled the first two exploration wells. We’ve had discoveries on two zones on both of those wells.”

The company’s other main development, the Officer Basin Project, consists of 22,527 square kilometers located in Western Australia. The company compares the suspected geology and

hydrocarbon potential in the area to basins in Saudi Arabia and Siberia.

“The Officer Basin is an area I’m familiar with,” Carroll said. “I had an adjacent permit working with another company. It’s a really interesting large basin that’s somewhat unexplored; no exploration in that area since the 1980s. It has both conventional and unconventional potential. It’s still at an early stage. The block we have interest in is enormous; it’s bigger than Wales.

We’re progressing that block, but it’s taking sometime to mature. It does have enormous potential.”

The project is currently held up pending completion of the Native Title Act requirements which deal with “heritage clearance, land access and other traditional owner issues.”

“Since the Mabo decision some 30 years ago, traditional owner rights have been recognized in Australia, though, there is a fairly well-trodden path now of negotiation,” Carroll said. “We are going down that path. So I was out on site in the permit in Warburton talking to the traditional owners earlier this year. We are planning the next visit and we expect that can be achieved in the next six to

E X P L O R AT I O N W O R L D

Company Information INDUSTRY

Oil & Gas HEADQUARTERS

Mosman , Australia FOUNDED

Drill cuttings sample bags

2011

12 months. There is a back up of an arbitration process, but we don’t think we’ll need that. We anticipate being able to reach agreement.”

Mosman has been in talks for some time with Trident Energy to totally acquire the company and its assets. Among the most significant assets that Mosman stands to gain from this deal are highly anticipated land holdings in the Otway, Amadeus and Canning basins. It was announced Sept. 18 that the Trident Energy negotiations had concluded and that the takeover of Trident was unconditional and allowed the company the right to “compulsory purchase of remaining shares,” according to Proactive Investor.

“We have completed yet another step in achieving Mosman’s objectives, and welcome the Trident shareholders to Mosman,” Barr said.

PRODUCTS/ SERVICES

Mosman (AIM: MSMN) is an Australia and New Zealand focused oil exploration and development company with a strategy to build a sustainable mid-tier oil and gas business by acquisition and organic growth. The Mosman management team has extensive international experience in the oil and gas and resource sectors.

They are experienced in the evaluation of oil and gas assets, in raising funds on international capital markets, in evaluating acquisitions and investment prospects and in the day to day management of public companies.

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